Ricochet News

Size doesn’t matter in fraud prevention

By Supplied - Oct 15, 2014
Size doesn’t matter in fraud prevention

While most business people can talk with ease about fraud and corruption, they have more difficulty talking about the ethical conduct that they would like to see in business. Very simply, business ethics revolve around actions that balance self-interests with the interests of others, and with the greater good. Taking or assigning responsibility for ensuring that business ethics is being practiced is however not as simple.

 For larger companies, it has become common practice to appoint an ethics officer. This incline in the appointment of ethics officers is mostly due to the various corporate governance developments and regulations. Smaller companies or organisations aren’t as strictly governed and regulated, and might therefore be unaware of the value of appointing an ethics officer.

 “There are many sound business reasons supporting the rationale for creating a position for an ethics officer, no matter the size of the organisation,” says Professor Deon Rossouw, CEO of the Ethics Institute of South Africa (EthicsSA).

 “At a broader level, widespread adoption of King III and similar codes, and the integration of many of its principles into law (such as the Companies Act) is testimony to the fact that good governance makes for good business. In the public sector, the Integrity Management Framework, which was adopted by Cabinet in 2013, requires that all national and provincial departments have an ethics officer.”

 According to Professor Rossouw, these codes and regulations came into existence because there is a business need for them, but businesses don’t necessarily understand what value an ethics officer can offer to the company. It is however easy to determine whether a business requires an ethics officer, with the following signs being the most obvious.

 Double standards for unethical conduct

An ethics officer is more than a signal or a guarantee of a company’s bona fides. He or she can help to prevent fraud, corruption and other malpractices from occurring by actively managing corporate ethics and building an ethical culture. Ethics tends to be an all-or-nothing game, and companies that tolerate unethical behaviour in certain areas quickly become rotten. Poor employee morale, high staff turnover, constant litigation: all of these cost money and time, ultimately acting as a brake on growth.

 Employees are unsure of how to deal with unethical conduct

The business environment is much more complex than it used to be, and its complexity is increasing. Navigating tricky ethical issues is increasingly something that requires professional expertise—common sense on its own (always in short supply anyway) is no longer a reliable guide. Ethics officers become the de facto helpline for company employees on all ethical issues.

 Stakeholders are concerned about fraud in the business

Investors, business partners and customers all are asking harder questions to ensure that companies with which they do business are ethical. As the 2013/2014 Global Fraud Report shows, global fraud is on the increase. An ethics officer acts as a signal that the company is serious about maintaining a high ethical standard.

 Whistle-blowing data not analysed

Ethical officers act as a clearing house for all ethical issues. Noteworthy added value they bring is the analysis of a company’s whistle-blowing data to look for trends.

 “Ethics officers are often appointed from amongst a company’s own staff in addition to other duties, and that is certainly a good option for smaller companies,” Professor Rossouw concludes. “However, training and certification are absolutely essential to ensure that the ethics officer is empowered and can deliver the maximum business value.”


Picture courtesy of www.fatima-group.com